Rate Cut

Bank of Canada Rate Cut

The Bank of Canada rate cut could be just around the corner. Analysts are predicting that due to the not-so good Canadian economy outlook, there is the possibility the Bank of Canada rate cut could be more real than fiction at its next interest rate announcement on March 4, 2015.

It was the surprise of the year, and we’ve barely started the new year, when the Governor of the Bank of Canada Stephen Poloz announced last week on Wednesday January 21 that they were lowering the key lending interest rate. Not to our surprise, this week Chartered Banks and other institutional lenders begin dropping their prime lending rate in response to the Bank of Canada’s rate cut. The Prime Rate is now at 2.85%.

picture courtesy of CBC

There are several indicators confirming the poor performance of the Canadian economy, such as the Statistics Canada labor market revisions, big 6 banks not lowering their prime rate equal to the Bank of Canada’s rate cut by 25 basis points and only lowering theirs by 15 basis points and another worry is the drop in oil prices which the Bank of Canada suggests is their main concern that could potentially get worse and impact not only the Alberta economy which is largely based on the oil sand productions, but also to resonate nation wide.

It’s a wait and see game at this point. After all, in the past 5 years there were many naysayers and predictions with what will happen with the prime lending rate, but at the end it never changed until 5 years later, and to our surprise, it went down instead of up.

What are your thoughts about the recent Bank of Canada rate cut, and future ones? How do you feel the Canadian economy is doing right now and where will we be next year this time?